What Are the Challenges of Maintaining Liquidity across Different Layer 2 Networks That Host Derivatives Markets?

The primary challenge is liquidity fragmentation. When liquidity is split across multiple Layer 2 networks, it can lead to wider bid-ask spreads, higher slippage, and a poorer trading experience compared to a single, unified market.

Moving assets between these networks can be slow and costly, creating friction for arbitrageurs who would normally keep prices in line. Establishing secure and efficient cross-chain bridges and interoperability protocols is crucial but technically complex and has historically been a major source of security vulnerabilities in the DeFi ecosystem.